The concept of an Android-based set-top-box streaming platform is exciting.

Unlike the Apple TV and Roku app ecosystem, Google’s Android world is open in terms of what apps can be developed and released for the platform. This means in the future, Google’s Nexus Player could end up getting a number of applications that other video streaming platforms never will.

Past attempts by Google at entering the realm of Apple TV and Roku ultimately failed. The circular Nexus Q, which was supposed to release in 2012, never made it to market, and Google TV didn’t take off like Google hoped. The only Google-made streaming product that has managed to find an audience is the $39 Chromecast dongle — and Google’s latest streaming device, the Nexus player, builds on what the Chromecast started.

Patrick O'Rourke/National Post

Enter the Nexus Player, Google and Asus’ latest $100 attempt at owning your living room. The big question surrounding the device is whether or not the Nexus Player is a worthy competitor to the Apple TV and Roku. Unfortunately for Google, right now it isn’t.

Google’s latest set-top-box runs on a modified version of Android 5.0 and only gives users access to a small selection of applications – 74 in total. The Nexus Player can play Android games, stream content from apps like Netflix and Hulu, and also double as a Chromecast, allowing users to send content from their mobile device to their television.

It’s shaped like a hockey puck and looks great sitting under a television. But despite the Nexus Players’ 1.8GHz Quad Core Intel Atom Processor and Imagination PowerVR Series 6 Graphics chipset, encountering lag and the occasional bout of stuttering is common when streaming content via Netflix and Hulu, or even locally downloaded files through apps like Plex. The device also doesn’t include an ethernet port, a big issue for user’s with spotty WiFi signals who enjoy streaming content in 1080p (full high-definition video).

Patrick O'Rourke/National Post

The Nexus Player’s game selection is limited and not a single title stood out from the pack of generic console game knock-offs available in the device’s game section, although the Nexus Player does support an additional gamepad (sold separately at $40). The dedicated controller is surprisingly great and borrows heavily from the Xbox 360 and Xbox One’s controller design. However the battery pack on the back of the gamepad forces the user’s fingers to curl in odd directions, and there are also currently only 35 different apps that support the Nexus Player’s gamepad.

The Nexus Player’s controller also isn’t worth its price tag considering top Android titles like Minecraft,Grand Theft Auto (any game in the series) and Sonic the Hedgehog, all games which work great with a joystick and physical buttons, aren’t available on the Nexus Player’s marketplace. The one gaming exception to the Nexus Player’s sad list of games is Badlands, a platformer with a dark, mood aesthetic and excellent gameplay.

Also, given the Nexus Player’s relatively small internal hard drive size – 5.8 gigabytes – most people won’t be able to fit many games on the device. There isn’t even a USB port on the Nexus Player, so you can’t expand the device’s storage capacity with a traditional hard drive (some people have used micro-USB adapters to expand the device’s hard drive size with varying degrees of success).

Patrick O'Rourke/National PostWhile the Nexus Player's $40 controller is decent, there aren't many games on the platform worth using it with.

The device’s packed-in set-top-box controller looks very similar to the Roku 3’s. Each button makes a satisfying and notable clicking noise when pressed and the input device is also light and simple to use, offering users a circular direction pad, a mic button (for surprisingly responsive voice-commands), a play/pause button, a back button and a enter button.

Once again borrowing from Microsoft, Android TV’s operating system adopts a tiled interface similar to the Xbox One’s. It’s simple to navigate and any app you’re interested in launching is just a few clicks away.

But it’s difficult to ignore the Nexus Player’s lackluster app selection, the main deciding factor when it comes to how useful streaming boxes actually are. Popular apps like Netflix, Hulu Plus, YouTube, Songza, Plex and Google Play Movies & TV are present in the Nexus Player’s marketplace, but popular applications like Sling TV, Twitch and HBO Go aren’t yet available on the Nexus Player.

Handout/GoogleThe

Side-loading regular Android applications is the only way around getting access to a number of apps the Nexus Player’s store is currently missing. This means users can also upload a variety of classic video game console emulators on the Nexus Player. However, it’s important to point out most of these applications don’t run very well since they were designed with touchscreen devices in mind.

The average user is likely better off sticking with established set-top steaming boxes from Roku and Apple, rather than experimenting with Google’s Nexus player.

The device has a significant amount of potential, but it’s not ready for mass consumption yet.

CUPERTINO, Calif. — Apple Inc sold more than US$1 billion of Apple TV set-top boxes in 2013 and is investing heavily in the next generation of products, Chief Executive Tim Cook said at the company’s annual meeting on Friday.

Apple’s ability to again transform the fast-moving technology arena is the central question in investors’ and Silicon Valley executives’ minds as the company’s growth slows, and rivals like Samsung Electronics Co Ltd and Google Inc take chunks out of its market share.

Industry executives and Apple observers continue to believe that the company will come up with some sort of wearable device, like a smartwatch, and speculation persists about a long-rumored TV product of some sort to shake up the living room viewing experience.

“We’re working on some things that are extensions of things you can see and some that you can’t see,” Cook said at the annual meeting, referring to a 32% increase in research and development costs last year.

Responding to a question about innovation, Cook said Apple preferred not to talk about new products under development so as not to tip off the competition.

“You can see we’re getting ripped off left, right and sideways,” he said.

Apple’s shares fell 0.27% to close at US$526.24 on Friday. They have clawed back substantial ground since falling below US$400 in June, but remain well below the record-high US$700 level of 2012, weighed by concerns about whether the company has any new hit products in the pipeline.

Though Cook steered clear of that discussion, he shed some more light on the Apple TV business, which executives have long referred to as a “hobby” for a company expected to chalk up some US$181 billion in sales this fiscal year.

The US$99 Apple TV set-top box, which streams content from Netflix and other video sources to a TV, had racked up US$1 billion in sales in the past year, he said.

“It’s a little more difficult to call it a hobby these days,” Cook said.

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Cook took pot shots at Google, saying that most users of its Android mobile operating system are using older versions, presenting a security threat. In contrast, he said, 89% of users of devices based on Apple’s iOS operating system have the most recent version of the software.

In the run-up to the meeting at 1 Infinite Loop, many investors had publicly debated whether Apple should not put any of its massive cash pile to better use.

Cook said the company will provide an update within 60 days on how it will use the cash, which totaled nearly US$160 billion at the end of 2013. That time frame is in line with Apple’s previous comments that it would announce its latest cash management plans around April.

Apple repurchased US$14 billion in stock in a two-week period earlier this year, under pressure from activist investor Carl Icahn, who had been publicly calling for the iPhone-maker to buy back an additional US$50 billion of stock on top of its existing buyback program.

The billionaire investor, who in late January said he held more than US$4 billion of Apple shares, withdrew his shareholder proposal following Apple’s announcement of the buyback.

Some analysts believe Apple may eventually dip into its coffers to buy something big. The iPhone maker has so far shied away from the mega-acquisitions that far more aggressive rivals like Google and Facebook Inc have pursued, though Cook did not rule out forking over a big sum of cash if warranted.

Cook said Apple has acquired 23 companies in the last 16 months and remained on the lookout for interesting technology and companies.

Apple is not in a race to acquire the most companies or to spend the most money, but that “doesn’t mean we won’t buy a huge company tomorrow afternoon,” he said.

And he warned shareholders not to focus too narrowly on short-term gains.

“If you’re in Apple for only a week … or two months, I would encourage you not to invest in Apple,” he said.

Apple Inc. shares look range-bound for the next 12 months or so and may follow the same disappointing trajectory as Microsoft Corp., says Barclays analyst Ben Reitzes, who downgraded the stock to equal weight from overweight.

Leaving his price target unchanged at US$570, implying an upside of about 6.5%, Mr. Reitzes told clients it was time to step aside given the maturing smartphone market.

“Frankly, we just couldn’t quite bring ourselves to use smart watches or TVs as reasons to raise numbers — nor were we fully convinced that these products could move the needle like new categories did in the old days,” the analyst said.

He also warned Apple may see margin pressures as it adds advanced features (such as Sapphire glass, curved class, new batteries, etc.) to upcoming iPhones at similar price points later this year and into 2015.

As a user, Mr. Reitzes is excited about Apple’s product pipeline, which includes innovation in areas like payments, geolocation, lifestyle and wearable devices, and in converged media with improvements to Apple TV.

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However, the analyst doesn’t think anything will be revolutionary such as the iPhone or iPad — not even a potential TV next year.

“We believe Apple’s story is all about iPhones and ‘new categories’ seem to be designed to make the iPhone more useful — but don’t necessarily re-accelerate growth in the iPhone category to sustainable double-digit levels,” he said.

Mr. Reitzes also noted that the valuation argument for Apple is becoming less and less compelling.

He compared the stock to Microsoft between 2000 and 2010 and found no precedent for large tech companies to simply start outperforming again after a tough year or two — if the law of large numbers is catching up to them and margins have peaked.

“Both companies seem to have been re-rated as investors ascribe little probability to a next ‘big thing’ after a series of attempts to reclaim past glory,” Mr. Reitzes said, noting Apple now trades at 12.7x analysts’ average 2014 estimates, down from its P/E of 15.9x in October 2012.

Meanwhile, Microsoft traded around 20x in 2004 after a strong rebound in 2003, but its multiple has since settled in the mid-teens.

“As a result, there doesn’t seem to be anything wrong with saying shares could be range-bound as we move from product cycle to product cycle until we can see Apple creating entirely new markets in the cloud,” the analyst said.

Apple Inc. is planning to introduce a new Apple TV set-top box and is negotiating with Time Warner Cable Inc. and other potential partners to add video content, according to people with knowledge of the matter.

Apple is aiming to unveil the device by April and have it available for sale by the Christmas holidays, though the release date could change because the company is still in the process of securing new agreements with programming and distribution partners, said two people, who asked not to be identified because the plans are private.

The new device, which plugs into a television set, will have a faster processor than the previous version and an upgraded interface to make it easier for customers to navigate between TV shows, movies and other online content, one person said. An agreement with Time Warner Cable would mark the first such deal with a cable or satellite company.

Tom Neumayr, a spokesman for Cupertino, California-based Apple, declined to comment, as did Maureen Huff, a spokeswoman for New York-based Time Warner Cable.

The product would set off what Apple Chief Executive Officer Tim Cook has promised to be a year full of new product introductions. The company also is exploring a smartwatch, people familiar with the plans have said. Apple needs new gadgets to revive growth after sales and profit stagnated in recent quarters.

Existing Structure

The release of an updated Apple TV box would be different from a full-sized television, which industry analysts such Gene Munster of Piper Jaffray Cos. have predicted.

Apple’s talks with Time Warner Cable have been going on since at least the middle of last year. The lag time between when Apple may announce the new set-top box and its release is because of ongoing negotiations with content providers.

The Time Warner deal would let Apple TV customers see a wider array of live TV channels. For the moment, they can access a limited number of individual channel apps, including Disney, ABC, ESPN, HBO, PBS and Bloomberg TV, owned by Bloomberg News parent Bloomberg LP.

Access to some programming on Apple TV requires customers to prove they pay for cable or satellite, a process known as authentication. Each different app requires a login and password to be entered.

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Apple has been working to streamline the process with the new Apple TV and has run into problems with Comcast Corp. and DirecTV, the two largest pay-TV distributors, according to two people with knowledge of the matter.

Eddy Cue, the head of Apple’s iTunes, has been trying to convince the two companies to let customers use Apple IDs instead of credentials from Comcast and DirecTV, these people said. The distributors would prefer keeping their customer information separate from Apple, according to the people.

In the market for digital set-top boxes, Apple is competing against Microsoft Corp.’s Xbox One and Roku Inc.’s Internet- connected device. Amazon.com Inc. also has been working on a TV box, Bloomberg News reported in April, and Comcast entered the market late last year with its new digital interface — called X1 — that sells and rents TV shows and films much the way that Apple does through iTunes.

More Devices

For Time Warner Cable, the deal would advance its “TV Everywhere” strategy, giving customers the ability to watch content on different devices. Its viewing app is already available on Apple’s iPad and tablets running Google Inc.’s Android software, as well as Roku and Amazon’s Kindle Fire.

Time Warner’s app currently features 300 channels thought it doesn’t fully replace its set-top box. The cable company had to secure streaming rights to allow viewing on digital devices, an increasingly important component of negotiations with the TV networks.

As portable devices become more popular, Apple has focused its TV strategy on promoting the iTunes digital store. ITunes sales — which include apps and music — surged 25 percent to $16.1 billion for the fiscal year ending in September.

Media companies that own TV shows and movies have been reluctant to sell content directly to online services such as Apple because it could harm the business of cable and satellite providers, whose licensing fees make up a substantial part of their revenue. Apple is attempting to address those concerns by partnering with cable companies.

The Apple-focused news website 9to5Mac previously reported the company was working on an updated Apple TV.

]]>http://business.financialpost.com/fp-tech-desk/personal-tech/apple-inc-said-to-release-new-tv-set-top-box-as-early-as-april/feed/0stdapple-tvAn iTV or iWatch? What could take Apple Inc to the next level?http://business.financialpost.com/fp-tech-desk/apple-inc-growth
http://business.financialpost.com/fp-tech-desk/apple-inc-growth#commentsTue, 28 Jan 2014 22:33:06 +0000http://business.financialpost.com/?p=407889

Somehow, 51 million iPhones just wasn’t enough for investors.

Despite taking investors on an historic run over the last four years — since 2010, first quarter profits are up almost 300% — it’s now crystal clear that shareholders are anxiously waiting to see what chief executive Tim Cook and his team have up their sleeves that will fuel the next phase of Apple Inc.’s growth.

At the top of their wish list is a new product category that can help reignite Apple’s growth trajectory the way the introduction of the iPhone and iPad fundamentally changed the fortunes of the company in 2007 and 2010.

On a conference call with investors on Monday, Mr. Cook said Apple has plenty of disruptive ideas but needs to concentrate resources on the best opportunities. He also said a new product category would be introduced this year.

Apple’s spending on research and development has nearly doubled in the past two years and second quarter expenses are expected to be unseasonably high, according to UBS analyst Steven Milunovich.

“Investors are getting antsy,” he said, highlighting Apple’s mention of “iBeacon” and the potential for mobile payments. He also cited the expected launch of wearable technologies, but the timing is uncertain.

“This approach has worked historically and fits with our belief in focus — we are willing to give Apple the benefit of the doubt,” Mr. Milunovich said.

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Exactly what new products Apple is working on remains uncertain. Depending on which rumour you choose to believe, Apple is working on a smartwatch, a flatscreen television or something else entirely.

“Hopefully Apple’s plans include two new and larger iPhones, a new larger iPad, a new Apple TV, more solutions/partners for payments and a wearable device,” Barclays analyst Ben Reitzes said in a note to clients, cutting his target price on the stock to US$570 from US$585.

With a new product category potentially on tap for 2014, some investors are looking to take advantage of any near-term weakness in the stock.

“We think investor sentiment will be bruised by the slowing iPhone momentum and indications the company misread market conditions with its rollout of the iPhone 5C among other factors,” Mark Moskowitz, an IT hardware analyst at J.P. Morgan, said in a note to clients.

“We think the issues are explainable and can be overcome.”

Amit Daryanani, an analyst at RBC Capital Markets, left his price target unchanged at US$590, but noted investors are becoming concerned about iPhone unit growth and Apple’s lack of production innovation.

“While gross margins beat expectations and are expected to remain stable next quarter,” revenue is expected to be flat on a year-over-year basis,” Mr. Daryanani said in a note to clients.

He thinks the stock will remain range-bound between US$500 and US$550 in the near-term, but did cite several upside catalysts, including Apple’s capital allocation plan, a steady but positive ramp-up with China Mobile, a new product cycle with the iPhone 6 and iPad 4, and potential new revenue streams such as wearable devices and a TV.

Just a little over a month after it released its new lineup of iPhones, Apple Inc. kicked off another product event on Tuesday in San Francisco, where the company revealed a slimmer, faster iPad called the iPad Air and an iPad Mini with Retina display.

Highlights from the event:

• Apple unveiled the iPad Air, which weighs just one pound (compared with 1.4 pounds for the previous version) — making it the lightest full-size tablet in the world, according to Phil Schiller, Apple’s senior VP of worldwide marketing

• The iPad Air will start shipping Nov. 1, including China for the first time. Price starts at US$499 for the WiFi 16 GB tablet, and US$629 for WiFi + 3G version

• Apple says it added Retina display to the iPad Mini. The Mini will start at US$399 for the 16GB WiFi only tablet, and US$529 for the WiFi + 3G version

• Apple announced that its new desktop operating system, OS X 10.9 Mavericks, will be available for free to users today

• Apple is knocking US$200 off the price of its new 13-inch MacBook Pro to US$1,299. The laptop has up to 9 hours of battery life. The larger 15-inch MacBook Pro will be sold for US$1,999 (compared with US$2,199 for the previous version), and has 256 gigabytes of storage. Both have Retina display and will ship today

• The high-end desktop computer aimed at what Apple calls “power users” will be available in December for US$2,999

The Chromecast is an accessory for your smartphone, tablet, or laptop. It works with iOS or Android, and with the Chrome browser on a laptop.

Videos and music are wirelessly sent to the Chromecast, and show up on your big screen TV. The iOS or Android device act as remotes allowing you to control the video on your TV.

It’s competition for Apple’s US$99 Apple TV. The difference between the two gadgets is that the Apple TV is a bigger box that has some applications built right into it. The Chromecast is just a conduit for whatever is sent through a mobile device.

Google has been experimenting with getting web video on the TV for a long time now. This appears to be its best effort yet. It looks like a simple, one step process that works on both major mobile platforms.

The big downside: Because it’s HDMI, you need to charge it with USB power adapter. So, you’ll have to remember to charge it up from time to time, it seems.

Apple Inc. is developing ad-skipping technology that would let owners of its Apple TV set-top box and future television devices watch shows without commercials, people with knowledge of the matter said.

Apple executives have briefed at least two owners of broadcast TV networks and cable channels, as well as some of the biggest U.S. pay-TV systems, said the people, who asked not to be identified because the talks are private. One proposal is for Apple to reimburse programmers for skipped ads, they said.

The company is seeking to develop TV products with broader appeal than Apple TV, a set-top device purchased by 13 million consumers, Chief Executive Officer Tim Cook said in May at the D: All Things Digital conference. Apple TV is more appropriate for “hobbyists” than mainstream viewers, he said. Apple continues to work on a “grand vision” to update TV-viewing that remains “much like 10 or 20 years ago,” Cook said.

Jessica Lessin, a technology writer, reported on July 15 that Apple was working on the ad-skipping initiative.

With advertising accounting for the largest share of their revenue, commercially supported TV networks have resisted skipping technology.

Almost three-quarters of consumers in a survey cited the ability to skip commercials as a main reason to use a digital video recorder, Google Inc.’s Motorola Mobility unit said in its annual media engagement barometer released on March 19.

Justin Sullivan/Getty ImagesApple has also been working to license more content for people to watch via Apple TV.

Apple has also been working to license more content for people to watch via Apple TV. In June, it announced deals to offer apps from Time Warner Inc.’s HBO and Walt Disney Co.’s ESPN to customers who already receive those channels from cable or satellite pay TV services.

The maker of iPhones and iPods is also reaching out to cable services, which buy content from media companies such as Disney. It is nearing a deal with Time Warner Cable Inc. that would let subscribers of that cable system watch channels on Apple TV, people have told Bloomberg. The companies plan to announce an agreement within the next few months, those people said earlier.

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Accessing content from the Internet on a TV has become common since Apple introduced Apple TV in 2007. According to Leichtman Research Group, 44% of U.S. households have a TV set connected to the Internet through a video-game console, Blu-ray player or streaming devices such as Roku Inc. and Apple TV. That’s up from 38% a year ago, the researcher said.

More competition is coming. Intel Corp., the world’s largest chipmaker, plans to begin selling a set-top box with Web-based pay-TV service by the end of the year.

Google has also held discussions with media companies about licensing content for an Internet TV service, people with knowledge of the matter said yesterday. The news was reported earlier by Dow Jones.

Amazon.com Inc., the world’s largest online retailer, plans to release a television set-top box that would stream video over the Internet into customers’ homes, people with knowledge of the matter said.

The device, due later this year, will connect to televisions, said the people, who asked not to be identified because they’re not authorized to speak publicly about it. It will also provide access to Amazon’s expanding video services, which include the Amazon Video on Demand store.

Amazon would move into closer competition with Apple Inc., which sells its own set-top box called Apple TV. The device would also compete with products from Roku Inc. and Boxee Inc., as well as gaming consoles from Microsoft Corp. and Sony Corp. that deliver video programming. Amazon Chief Executive Officer Jeff Bezos is pushing the company into a broadening array of hardware, including tablets, electronic readers and a planned smartphone.

It would certainly make some sense . . . They have a ton of content, an existing billing relationship with millions of users

“It would certainly make some sense,” said Jason Krikorian, a general partner at venture-capital firm DCM, and the former co-founder of Sling Media, who does not have knowledge of Amazon’s plans. “They have a ton of content, an existing billing relationship with millions of users.”

Many competing set-top boxes already give access to Amazon’s video catalog. By building its own device, Seattle- based Amazon can put its content more directly in center of consumers’ living rooms, while giving developers another reason to create applications for Amazon’s digital ecosystem.

A representative of Amazon declined to comment.

Lab126 Skunkworks

The set-top box is being developed by Amazon’s Lab126 division, based in Cupertino, California — the city that’s also home to Apple. Lab126 has toyed with building connected television devices for several years, the people familiar with the effort said.

Amazon could also draw on its marketplace of downloadable apps, as well as its “reputation for solid hardware products and a terrific channel through which to promote the product,” Krikorian said.

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Plans for pricing couldn’t be determined. Amazon’s typical strategy is to sell hardware at competitive prices, sometimes at a loss, with the intent of making up for discounts through sales of content, including books and movies. Amazon could also use the set-top box to promote its online store.

Amazon rose less than 1% to US$269.52 just after 1 p.m. in New York. It has climbed 7.2% this year through yesterday, compared with a 24% decline for Apple.

Video Executives

The project is being run by Malachy Moynihan, a former vice president at Cisco Systems Inc. who worked on the networking giant’s various consumer video initiatives. In the late 1980s and 1990s, Moynihan spent nine years at Apple. Among the other hardware engineers working at Lab126 with experience making set- top boxes is Andy Goodman, formerly a top engineer at TiVo Inc. and Vudu, which is now owned by Wal-Mart Stores Inc., and Chris Coley, a former hardware architect at ReplayTV, one of Silicon Valley’s first DVR companies.

Amazon’s set-top box would include programming from the company’s on-demand video service, which includes newer films and TV shows, and the instant-video service provided free to members of the Prime two-day shipping service.

Amazon has been rapidly expanding its efforts in the video arena. Earlier this week it introduced several television pilots, which it financed, and it is now monitoring customer feedback to decide which ones to produce as full series. The company has also paid to secure exclusive streaming rights to hit shows such as “Downton Abbey.”

Netflix, Hulu

While the device will compete with other set-top boxes, it could coexist with rival streaming services, such as Netflix Inc., Hulu LLC and Google Inc.’s YouTube. Owners of Amazon’s Kindle Fire line of tablets can already access those services. Still, Amazon’s own video and music services will probably be more prominently integrated into the device.

Another looming question: the product’s name. While the people familiar with the project were not sure what it will ultimately be called, Amazon’s five-year history in the hardware business suggests an obvious choice: Kindle TV.

Vimeo has launched a new on demand video service, giving Canadians another destination for buying and streaming movies, television shows, and short films online.

Announced Tuesday morning at the SXSW Interactive and Film festival in Austin, Texas, Vimeo On Demand will be available to all Vimeo users, but content creators will have the ability to limit the availability of their work to specific geographic regions.

Most of the films in the On Demand catalog at launch are already available for Canadians to stream and buy.

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“We are proud of this first phase of Vimeo On Demand, and we’re already working on another suite of creator-focused features to release in the near future,” said Blake Whitman, vice president of creative development, in a press release.

YouTube brought its own movie rental and purchase store to Canadians in the Fall of 2011, and has since grown to offer a mix of big-name theatrical releases and back catalog content. New releases typically cost $4.99 to rent in high-definition, and up to $19.99 to purchase.

However, while YouTube offers a mix of high-profile films and Hollywood fare, Vimeo is catering more to the community of indie filmmakers and artistic creators that have set the service apart. The company will keep 10% of revenue, for example, and share the remaining 90% with content creators.

Vimeo On Demand will also allow content creators to set their own price for rentals and purchases. On the high end, the Jeremy Jones snowboard film Further can be purchased to own for $9. The animated film It’s Such A Beautiful Day, meanwhile, is being made available for $2 to rent, and $6 to own.

As for where such paid content can be watched, Vimeo already has a backdoor into most living rooms – On Demand can be accessed on almost any device with Vimeo integration, including Android, iOS, AppleTV, Xbox Live and even smart TVs from Samsung and Panasonic.

It’s not a nice, simple, easy story that Apple is going to come in and turn the world upside-down and we’re all going to live happily ever after

Apple Inc. engineers have been working since 2005 to reinvent TV viewing. Designing the gadget may prove easy compared with convincing media and cable companies to loosen their grip on the television industry.

This battle is nothing like Apple’s previous forays into the music and mobile phone spheres, when the maker of iPods and iPhones negotiated with weakened record labels and a fractured wireless industry. Now the stakes are even higher and the competition tougher.

Apple is vying with the likes of Google Inc., Microsoft Corp. and Amazon.com Inc. to make TVs the digital hub of people’s lives in an industry projected to reach US$200-billion worldwide by 2017. Whoever wins must first strike deals with media companies or cable providers who have little incentive to cede valuable revenue streams. The result: Apple won’t be releasing a new TV product this year, as analysts had predicted, said a person familiar with the company’s plans.

“It’s not a nice, simple, easy story that Apple is going to come in and turn the world upside-down and we’re all going to live happily ever after,” said Craig Moffett, an analyst with Sanford C. Bernstein & Co., who has been studying the cable industry for two decades. Moffett added that any notion that Apple could soon unveil its TV system “ignores the business realities that make this such a complicated industry.”

In recent negotiations, the main stumbling blocks with cable companies have included a tussle for control over the software that determines the screen interface — the look and feel of the viewer’s experience, said people familiar with the discussions. That’s also what TiVo Inc. has been offering for more than a decade with its hard drive-equipped set-top box that allows viewers to easily record broadcasts and, more recently, stream Internet fare. TiVo’s growth, though, has been stymied by fierce resistance from cable TV providers.

Diverging Interests

Apple, based in Cupertino, California, and cable providers have also diverged on whether a new Apple TV set-top box should be sold directly to customers or leased through cable providers, said people familiar with the talks.

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So far, Apple’s television effort has been limited to the US$99 Apple TV, a small box that streams movies, shows and other content from the Web. Unlike set-top devices from cable providers, it doesn’t deliver live broadcasts or record shows.

Since the middle of the last decade, Apple’s engineers have been working on a more advanced product to allow viewers to quickly find shows and movies, blending both live and recorded material, the people said. It would recommend content based on interests and work seamlessly with Apple’s family of other devices. An iPhone or iPad would double as a remote control, the people said.

Apple rose 0.6% to $674 at 10:41 a.m. in New York. The shares had gained 65% this year through yesterday.

Broad Deal

Unlike successful negotiations with music companies and book publishers, Apple co-founder Steve Jobs was never able to strike a comprehensive deal to create a product fitting that vision before his death last October. He regularly told Apple executives that unless the company can get more content, especially live broadcasting, Apple’s impact on television wouldn’t be disruptive, said two former Apple managers.

“We continue to pull the string to see where it takes us, and we are not one to keep around projects that we don’t believe in and so there are a lot of people here that are believers in Apple TV,” Tim Cook, who took over as Apple’s chief executive officer a year ago, said in July.

Following Jobs’s death, much of the responsibility for securing content deals has fallen to Eddy Cue, the senior vice president in charge of iTunes, said the people.

User Experience

Apple started talking with cable and media companies when it was building the first Apple TV, released on the same day as the iPhone in January 2007. Before the device debuted, talks with Comcast Corp. fell apart because the cable company wouldn’t let Apple control the entire experience, including sharing data and giving access to all of Comcast’s video content, according to a person familiar with the talks.

CBS Corp. Chairman and Chief Executive Officer Les Moonves said in a public appearance last year that he also has rejected different Apple TV proposals.

In some of its most recent negotiations, Apple has focused on cable companies that would give it access to live broadcasting without needing new content agreements. Under such a deal, Apple would release a new product for customers to access their set of channels, paid with a cable subscription, instead of leasing a set-top box from pay-TV operators for a monthly fee, a person familiar with the discussions said. Apple may also lease the boxes through cable companies, another person said. The box would be Internet-connected, similar to Comcast’s new X1 interface, which is available in Boston, Atlanta and Augusta, Georgia, the person said.

Customer Links

Walter Price, an investor with RCM Capital Management in San Francisco who met with Apple executives recently to discuss their television efforts, said cable and media companies are concerned that a better-designed Apple product will undermine their business model.

“It’s a tough problem because the cable companies and media companies are not very enthusiastic about the prospect of Apple creating a better user interface,” said Price, whose firm owns US$1.9-billion worth of Apple shares.

Cable companies are also concerned about losing their link to customers in the same way Apple overhauled the relationship between wireless carriers and their customers after the iPhone debuted, said Rich Greenfield, an analyst at BTIG LLC in New York.

Regional Rollout

Apple is furthest along negotiating with Time Warner Cable Inc., said the people familiar with the talks. Yet even if Time Warner Cable agrees to a deal with Apple, it wouldn’t represent a radical change for customers, who would still pay their monthly cable bill.

Cable companies and media companies are not very enthusiastic about the prospect of Apple creating a better user interface

Apple may be looking to Time Warner Cable to be its first partner in a similar way that AT&T Inc. helped bring the iPhone to market, one person said. This would be a departure from Apple’s traditional strategy of releasing products nationally. Time Warner Cable, like all cable companies, only operates in certain regions. Los Angeles and New York City are its largest markets. Under this thinking, Apple would then expand the service if it proves successful, one person said.

“Unlike other distributors, we are not religiously wedded to absolutely controlling the user interface,’ said Robert Marcus, chief operating officer of Time Warner Cable, in a telephone interview. He declined to comment on Apple specifically.

Integrating Content

Without gaining access to new rights, Apple would end up largely replicating TiVo’s business model and relying on customers to buy a device based on how it organizes content and combining it with streaming services like Netflix, rather than unlocking content in one service.

“You need an approach where your role in the business aligns with the operator, rather than a strategy where you’re looking to insert your brand in a way that diminishes the perception of value of what the operator brings to the table,” said Tom Rogers, a veteran of such negotiations as CEO of TiVo, in a telephone interview.

Apple also would like to integrate more on-demand content for viewers to watch when they want, including older episodes of television shows, people familiar with the plans said. For that content, Apple needs to strike deals with media companies such as Time Warner Co., Viacom Inc. and News Corp.

Cable companies have released applications for the iPhone and iPad to allow customers to watch television on their mobile devices. There’s a reluctance to go further because giving a third party too much control may lessen the value of the bundles of TV, Internet and phone services that cable companies sell, Charlie Herrin, Comcast’s senior vice president of product design and development, said in an interview. He declined to comment on Apple.

“If I’m a cable company, do I really want to let Apple into my house?” said Jason Hirschhorn, the former chief digital officer at MTV and co-president of MySpace.

Hulu LLC, the online television business owned by Fox, ABC and NBC, said its US$7.99-a-month premium service is coming to Apple TV today, adding a new source of subscribers for the company.

Customers can register by going to Hulu’s website or through their Apple TV, a set-top box offered by Apple Inc., according to a posting on the company’s blog today.

Hulu lets users watch programs from most of the major U.S. broadcasters, as well as showing clips and movies. The Plus version gives customers access to more episodes and other features and works on a wider range of devices. It’s already available on Sony Corp.’s PlayStation 3, Microsoft Corp.’s Xbox 360, Roku Inc. devices and Nintendo Co.’s Wii. It also works with mobile devices such as Apple’s iPad and iPhone, Amazon.com Inc.’s Kindle Fire and phones running Google Inc.’s Android.

Related

The closely held joint venture increased sales 60% to US$420-million last year and has more than 1.5 million paying subscribers to Hulu Plus, according to chief executive officer Jason Kilar. The service features popular programming such as “Family Guy,” “Modern Family,” and “The Daily Show.”

You now have a ton of choices to watch streaming content from the web on your big screen TV.

There are almost a dozen set top boxes like the Apple TV out there, and several more so-called “Smart TVs” with streaming services built in.

Before you make a decision try to decide which features you care about the most, how much you are willing to spend and if you want to completely cut out cable, or complement your current cable subscription.

If you think the tablet space is getting crowded, take a look at all those smart TV gadgets out there.

Today we have Apple TV, Boxee, Roku, and a slew of so-called “Smart TVs” with apps and streaming services built in. Then there are streaming home entertainment systems like the popular Sonos players.

So with all the competition out there, it’s a bit odd that Google is getting into the streaming business with the Nexus Q, especially considering that it already has Google TV.

The Nexus Q is a US$299 spherical gadget that hooks up to your TV and streams music or video from the Google Play online store. There’s no interface like you get on the Apple TV or Google TV. Instead, you control everything from an app on your Android phone or tablet. Unlike Apple’s Airplay, content doesn’t stream to your TV from your device, but directly from Google’s servers. Your ‘droid is just the controller.

Design

The Nexus Q is a gorgeous-looking piece of hardware. It has a pleasing, spherical shape with a flat bottom so you can stack it on your entertainment center. There’s thin LED band that circles the device. The lights react to the music your playing, splaying trippy colors around your living room. Pretty cool.

It’s also surprisingly heavy for such a small device. Google packed a full Android-powered computer in the Nexus Q, so there are a lot of powerful guts inside. Hidden in the back are ports for Micro HDMI, Optical audio, Ethernet, Micro USB, and banana jacks for stereo systems.

The whole package really is impressive, and it’s a nice departure from all those squarish devices clogging my entertainment center.

Using It

With the Nexus Q, the user experience is more about what you can’t do than what you can.

Play your own music files unless you upload them to Google Music first.

So I found it very annoying that a device that costs about three times as much as the competition underperforms in every category possible. Unless all your digital content comes from Google Play, the Nexus Q is next to useless. (And chances are you don’t have much content from Google since the Play store only recently added a broader selection of music, movies, and TV shows.)

When you want to play a video on the Nexus Q, you have to get it started on your Android device first. Then you tap a “Play” icon in the top right corner to tell Google to send the video to your Nexus Q. It takes forever. I often had to wait up to 30 seconds for a video to finally appear on my TV. Music was a bit faster, but overall it’s nowhere as seamless as Apple’s AirPlay.

Once you do get a video up and running, the experience is awful. The Nexus 7 tablet I reviewed came with a free copy of the new Transformers movie. I couldn’t even get the Nexus Q to load the video. After staring at the “loading” animation for several minutes, I just gave up. I was able to get a National Geographic show running, but it was almost unwatchable. Video quality was nowhere near as good as what I get on my Apple TV or Boxee and the stream would stop and restart every few seconds.

I do like how the Nexus Q integrates with YouTube. Google just released a new version of the YouTube app for Android that makes it a lot easier to share and watch your favorite channels. I didn’t have any problems getting YouTube videos to load on the Nexus Q like I did with Google Play videos.

It’s a handy feature, but hardly a redeeming one.

Should You Buy It?

I can’t think of one good reason to buy the Nexus Q. There are so many better, more affordable options like the Apple TV (US$99), Roku (starts at US$79), and Boxee Box (US$179) out there.

RANCHOS PALOS VERDES, California – Apple Inc Chief Executive Tim Cook said technology for televisions was of “intense interest” but stressed the company’s efforts would unfold gradually amid speculation the iPad and iPhone maker was on the brink of unveiling a revolutionary iTV.

In one of his more revealing interviews since assuming the helm of the world’s most valuable company, Cook also said he hoped someday to see Apple products manufactured in the United States and outlined his approach to managing an organization long-associated with its late founder Steve Jobs.

‘We’re going to keep pulling this string and see where it takes us’

“Another thing that Steve taught us all is to not to be focused on the past,” Cook told this year’s All Things Digital conference, an annual gathering of A-list technology and media executives in the upscale California coastal resort town of Rancho Palos Verdes.

Industry insiders and executives say Apple may unveil a TV-based device in late 2012 or 2013 that has the potential to shake up the cozy television content and distribution industry the way the iPod and iPhone disrupted music and mobile content, but Cook has steered clear of commenting on that issue directly.

“This is an area of intense interest for us,” Cook said, referring to Apple’s existing television set-top box product. “We’re going to keep pulling this string and see where it takes us.”

When asked specifically if Apple was making a television set, Cook said he was not going to answer that question.

‘Can we make a product that we would want?’

Apple already sells a US$99 set top box called Apple TV that streams Netflix and other content. Cook, who has previously said the Apple TV product had a hobby status inside the company, noted the company was sticking with it despite not being known as a “hobby kind of company.”

“Here’s the way we would look at that, not just at this area but other areas, and ask can we control the key technology?” he said in response to a question about how Apple thinks about improving the television experience for consumers. “Can we make a significant contribution, far beyond what others have done in this area? Can we make a product that we would want?”

Apple has been in negotiations with content companies for its devices. It began talks earlier this year to stream films owned by EPIX, which is backed by three major movie studios.

The company has a good relationship with content owners and doesn’t see the need to own a content business, Cook said, adding he has met with several people in that business recently.

Related

In wide-ranging remarks, Cook said he would like to see more of the company’s products assembled at home than in China and contain more U.S. components such as semiconductors.

Apple has been criticized for relying on low-cost Asian manufacturers to assemble its products and for contributing to the decline of the U.S. manufacturing sector.

Cook, who took the helm of the world’s most valuable technology company in August shortly before founder Steve Jobs died, said manufacturing in the United States was difficult because of declining tool-and-die manufacturing expertise, among other things, but he was working on it.

“There are things that can be done in the U.S., not just for the U.S. market but that can be exported for the world,” Cook said. “On the assembly piece, could that be done in the U.S.? I hope so, again, one day,” he added.

Apple’s final assembly is done through Asian contract manufacturers, particularly Taiwan’s Foxconn Technology Group and its listed entity Hon Hai Precision. Cook noted that Apple does some component manufacturing in the United States, including the main microchip that runs the iPhone and iPad.

Cook also said some of the glass for the iPhone and iPad is made in a plant in Kentucky.

The CEO talked about how the iPad was just in the “first innings,” but declined to say what was in store for it next.

He reiterated his belief that many consumers will use the iPad more than computers. In response to a question about PC software-maker Microsoft Corp’s efforts to enter the tablet market, Cook brushed off the threat.

“The more you look at the tablet as a PC, the more the baggage from the past affects the product,” he said.

Apple released the iPad in 2010 and it has quickly defined the tablet computer market, selling more than 67 million units so far.

DOUBLING DOWN ON SECRECY

The 51-year old Cook said he spends less time focused on marketing and design as CEO than his predecessor, who Cook said spent “virtually all of his time on those two things.”

At a company the size of Apple, Cook said, having a strong team is critical.

Justin Sullivan/Getty Images filesTim Cook said he spends less time focused on marketing and design as CEO than his predecessor Steve Jobs, who Cook said spent "virtually all of his time on those two things."

“You could have an S on your chest and a cape on your back and not be able to do everything,” said Cook, who later cited Robert Kennedy and Martin Luther King Jr as well as Walt Disney Co Chief Executive Bob Iger as figures that he looks up to.

Cook also discussed efforts to make the company more transparent on certain issues, such as supplier responsibility and environmental matters, but stressed he was committed to preserving Apple’s culture.

One Jobs legacy that Cook flagged is Apple’s well-known penchant for going to great lengths to keep details of new products under tight wraps, noting that he planned to “double down on secrecy” on products.

Gou’s comments mark the first official acknowledgment from either Apple or its manufacturing partners that a new television is in the works. However, Gou suggests that Apple is still in the planning stages.

Konrad von Finckenstein, chairman of the CRTC, has left the building, and in his absence a considerable void at the federal regulator for the fast-converging broadcast and telecommunications industry.

The outbound chairman, whose five-year term expired Tuesday, leaves the Canadian Radio-television and Telecommunications Commission at a crossroads, its role as custodian of a national culture maintained through our airwaves challenged both politically and by unprecedented technological change.

Fundamental questions loom, not least about who the Conservatives will appoint to head the industry watchdog over the next few years, a period likely to be as tumultuous as Mr. von Finckenstein’s tenure was.

“There’s more politics involved now than there ever has been,” one industry source said. “That’s a truth. As a result, you’ve got to be able to play the Ottawa game better than you ever have had to.”

The former chair, 66, was a respected yet controversial figure.

Key regulatory decisions made by him were reversed on at least two occasions by Ottawa in heretofore rare public quarrels between the arms-length regulator and government.

The first policy spat was in 2009 when Cabinet overruled the regulator and allowed foreign-backed Wind Mobile to launch cellphone services, which was a contravention of the Telecom Act, according to Mr. von Finckenstein. The second occurred early last year when then-Industry Minister Tony Clement threw the commission’s decision to allow Bell to introduce usage-based Internet billing onto smaller competitors back at it.

The game seems chiefly to mean closely obeying the wishes of this populist-minded Conservative government.

“You do have to know what the [decision] ramifications are going to be [politically],” another regulatory source said. “It affects the credibility of the CRTC if it comes out with something and the government immediately flips it back.”

It is widely expected Heritage Minister James Moore will appoint vice-chairman of telecom Leonard Katz as the interim replacement Wednesday, but the veteran commissioner and industry insider is not anticipated to hold the position for long. Instead, Tom Pentefountas, the relatively new vice-chairman of broadcast is touted by some as the long-term candidate, though he is far from a lock.

Despite his active lobbying for the post, others said this week Mr. Pentefountas, a Montreal lawyer with close ties to the Conservative party, hasn’t earned a reputation for possessing the kind of grasp required to oversee a market place being transformed by an array of mobile and Internet products stampeding over older business models. “He’s occasionally come out of left field,” one source said.

Whoever inherits the job, a successful tenure may hinge on whether the appointee can convince Ottawa to re-writing the rulebook.

The Broadcast and Telecom Acts — two pieces of legislation written decades ago — continue to dictate the commission’s decision-making. The anachronistic framework has come to undermine the CRTC’s powers, the departing chair has warned repeatedly.

“Our present tools are very inadequate,” Mr. von Finckenstein said late last year.

Since taking over in 2007, the former Federal Court judge has advocated merging legislation to reflect a consolidating market place that has seen the biggest broadcast entities bought up and integrated with larger telecommunications operators, such as Rogers Communications Inc. and BCE Inc.

Updated rules must also contemplate new Web-based services such as Apple TV and Netflix Inc., which skirt Canadian regulation altogether.

The new market structure means the cultural objectives within older broadcast laws should be dropped or transferred into a unified act that binds cable giants like Rogers Communications Inc. and Shaw Communications Inc. as well as phone behemoths like BCE Inc. and Telus Corp. to a single set of rules, he said.

“It’s the [Internet] bits that are being transported now, so lets have an Act that deals with the bits, then overlay cultural exemptions or exceptions or whatever to foster Canadian cultural goals,” he said. “That’s really what is required.”

As the technology world descends on Las Vegas this week for the industry’s annual game of show that is the Consumer Electronics Show, the world’s most valuable technology company is, as per usual, nowhere to be seen.

Apple doesn’t exhibit at CES. The Cupertino, California-based computer giant has long employed a strategy of launching new products and services at its own carefully timed and scripted press events, where it can command the spotlight.

Still, despite its absence, Apple is consistently one of the most talked about companies each year at CES, as rumours and speculation run rampant while the tech world wonders what the company might have up its sleeve.

Of course, this year is no exception. With rumours of an Apple flatscreen television set flowing freely this year, some of the biggest names in the technology industry are already rushing to outmaneuver their most cunning rival, despite the fact Apple hasn’t announced anything at all.

Part of the reason so much attention is paid to Apple in Las Vegas each January is that the company tends to launch new products in the weeks following CES. The iPhone was actually unveiled at the same time as CES in 2007, but not in Las Vegas, rather at the Macworld Conference in San Francisco.

Two years ago at CES, amid rumours that Apple was preparing to launch a tablet, computer manufacturers and software companies were tripping over one another to show off their own touchscreen computing devices.

Related

This year, Apple’s unannounced TV strategy is once again the topic of heated debate. Only this time, the phantom product that has set the tech world on edge is the rumoured Apple flatscreen television, which may or may not exist and which may or may not be hitting the market this year.

“I’d like to create an integrated television set that is completely easy to use,” Mr. Jobs tells Mr. Isaacson in the book. “It would be seamlessly synced with all of your devices and with iCloud … It will have the simplest user interface you could imagine. I finally cracked it.”

Although Web-connected television sets aren’t exactly new, manufacturers such as Sony, Samsung, Panasonic and now Lenovo are all stepping up their efforts to marry advanced Web functions and applications with their flatscreen television sets.

Many of these connected TVs feature either Google Inc.’s Android operating system, or the Silicon Valley giant’s own Google TV platform, which enables users to scour the Web for videos and other content using Google’s search technology.

This week at CES, industry heavyweights Samsung and LG are expected to throw their weight behind Google TV — joining Sony and Vizio — launching new flatscreens featuring the technology.

The next logical platform for the Internet is the television set, and consumers are already adopting new Web-delivered video entertainment options en masse. In North America, Netflix Inc.’s online streaming service now accounts for nearly one third of all downstream Internet traffic.

While some consumers are content to watch videos and other Web content on tablets or PCs, increasingly, they want to have those same experiences on the big screen in the living room, facilitated through a video game console, set top box or Web-connected television.

For television manufacturers, Internet-connected televisions appear to be the next evolution of the living room big screen, providing the potential for a new wave of upgrades that still hasn’t materialized since the launch of 3D technology.

Depending on which rumour you want to believe, Apple’s phantom TV may also feature the company’s Siri voice recognition technology, enabling users to change channels or search for movies using verbal commands instead of a remote control.

If Apple is indeed pursuing this type of technology, the company would not be alone. Microsoft Corp.’s Kinect video game technology already allows users to control their experience with verbal commands and hand gestures, while Lenovo’s new K91 smart TV — unveiled here in Las Vegas this week — also features voice technology.

True to form, Apple is reportedly preparing a media event for later this month in New York City. Although no one is quite sure what the company will say at that time, one thing is for certain: when the Apple spotlight turns on, the world will be watching.

The world’s most valuable technology company became more valuable on Monday than it has ever been before.

Shares of Apple Inc. briefly hit US$427.61 in early trading on the Nasdaq, up US$5.21 or 1% from its Friday evening close, before falling back to about US$424 by midday. The figure represents the highest price ever achieved for the 35-year-old company.

The milestone can be at least partially attributed to a Goldman Sachs report issued on Sunday in which the investment bank raised its price target on the Cupertino, Calif.-based company’s stock to US$550 per share from US$520. Apple is set to report first-quarter earnings on Jan. 24.

“We believe Apple is set to report healthy December quarter upside and all signs point to better than expected performance through 2012,” wrote Goldman analyst Bill Shope, noting Apple’s share price grew by 26% over 2011 compared to what was a relatively flat year for the rest of the S&P 500.

“In addition to our expectation for earnings upside relative to consensus, we expect several key catalysts to drive the stock price and the multiple higher this year.”

Expectations are for Apple to continue its reign as monarch of the mobile market throughout 2012, with analysts expecting the company to continue dominating the paid apps sector and to start issuing a dividend at some point this year. On the gadget front, Apple fans can look forward to a new iPad model launching in 2012, which Mr. Shope expects will arrive in March.

“In addition, we expect Apple to release the long-awaited iPhone 5 this summer, further stimulating global demand momentum for this high-margin product family,” he said.

“We also expect Apple to release a branded television set in late 2012 or early 2013, and the data points emerging from this ramp should drive incremental momentum for the share price.”

Apple’s last all-time high of US$422.24 was achieved on October 18 of last year, two weeks following the passing of Steve Jobs, the company’s iconic co-founder who had been battling cancer for several years.

The company founded in a garage owned by Steve Jobs’ parents is currently worth US$393.41-billion.

“Four hundred thousand, that was the number of units pre-ordered in October last year by people eager to get their hands on the commercial version of the Aakash Tablet, the world’s cheapest tablet device, slated for release this month by Montreal-based tech upstart DataWind Inc.”

“When he was diagnosed with motor neurone disease aged just 21, Stephen Hawking was only expected to live a few years. He will be 70 this month, and in an exclusive interview with New Scientist he looks back on his life and work.”